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The  Cost  of  Growing  Timber  in  the  Pacific  Northwest, 

as  Related  to  the  Interest  Rates  Available 

to  Various  Forest  Owners 


BY 

BURT  P.  KIRKLAND 

Associate  Professor  of  Forestry 
University  of  Washington 


Reprinted  from  the 
Forest  Club  Annual,  1915 


Seattle 

University  of  Washington 
1915 


The  Cost  of  Growing  Timber  in  the  Pacific  Northwest, 

as  Related  to  the  Interest  Rates  Available 

to  Various  Forest  Owners 


BY 


HURT  P.  KIRKLAND 

Associate  Professor  of  Forestry 
University  of  Washington 


Reprinted  from  the 
Forest  Club  Annual,  1915 


Seattle 

University  of  Washington 
1915 


THE  COST  OF  GKOWING  TIMBER  IN  THE  PACIFIC  NORTH- 
WEST, AS  RELATED  TO  THE   INTEREST  RATES 
AVAILABLE  TO  VARIOUS  FOREST  OWNERS 
BURT  P.  KIRKLAND,  Associate  Professor  of  Forestry 

The  cost  per  acre  of  growing  timber  anywhere  depends  on  five  main 
factors,  viz.  (1)  The  value  of  the  land,  (2)  The  cost  of  stocking  it  with 
young  trees,  (3)  The  administration  of  the  operation  and  protection  of 
the  young  timber,  (4)  The  taxes,  (5)  The  rate  of  interest.  The  cost  per 
thousand  feet  depends  in  addition  upon  the  productivity  of  the  land  in- 
volved. For  the  purpose  of  this  discussion,  however,  the  statement  may 
best  be  put  in  another  way,  namely,  that  the  costs  per  acre  are  as  follows : 
(1)  Interest  on  the  value  of  the  land,  (2)  The  cost  of  stocking  it  with 
young  trees,  (3)  Interest  on  this  amount  from  time  of  stocking  to 
maturity,  (4)  The  annual  expenses  for  administration  and  protection, 
(5)  Interest  on  each  annual  expense  from  time  of  expenditure  to  time  of 
maturity  of  the  timber,  (6)  The  annual  taxes,  (7)  Interest  on  each 
annual  tax  from  time  of  payment  to  maturity  of  the  timber.  The  total  of 
these  costs  per  acre,  divided  by  the  average  product  per  acre  gives  the  cost 
of  producing  1,000  board  feet  of  timber. 

The  amounts  for  some  of  these  items  vary  with  natural  conditions, 
and  of  others,  with  the  ownership  of  the  land.  Thus  state  or  federal 
ownership  modifies  the  element  of  taxes  and  changes  the  rate  of  interest. 
Private  ownership  might  facilitate  administration  in  some  ways,  though 
it  can  hardly  be  expected  to  reduce  the  cost,  owing  to  the  smaller  areas 
administered.  The  amounts  of  the  various  items  under  various  conditions 
and  forms  of  ownership  are  discussed  below. 

Interest  on  the  Land  Value 

The  cost  of  cutover  lands  of  supposed  agricultural  value,  or  of  a 
nature  such  that  the  seller  can  convince  the  inexperienced  buyer  that  they 
have  agricultural  value  would  probably  run  from  $10.00  to  $50.00  per  acre 
in  Washington,  where  the  values  are  not  influenced  by  proximity  to  centers 
of  population  or  other  advantages  of  a  similar  nature.  Hillsides,  appear- 
ing even  to  the  unpracticed  eye  too  steep  for  agriculture,  may  be  pur 
chased  for  $3.00  to  $5.00  per  acre.  The  higher  values  first  mentioned 
are  undoubtedly  beyond  any  present  use  value  of  the  land  for  agriculture, 
but  the  optimism  of  the  West  can  be  depended  upon  to  maintain  them, 
because  the  buyer  of  land  has  sanguine  ideas  as  to  the  income  to  be  de- 
rived. If  the  land  is  to  be  used  for  forestry  we  must  concede  that  current 
values  must  be  met.  Land  which  is  held  at  over  $10.00  per  acre  should 
have  agricultural  value,  and  for  the  present  at  least,  should  be  considered  in 
that  class  and  no  attempt  made  to  use  it  for  forestry.  The  writer,  therefore, 
believes  that  in  Washington  fair  values  for  forest  soil  would  be  $10.00  per 
acre  for  Quality  I,  $5.00  for  Quality  II,  and  $2.00  for  Quality  III,  re- 
ferring to  three  quality  yield  tables  for  Douglas  fir  prepared  by  the  U.  S. 
Forest  Service.*  These  tables  classify  quality  of  soil  for  forest  purposes 
according  to  its  actual  productivity.  In  growing  timber  it  must  be  re- 
membered that  the  soil  is  not  used  up  by  the  growth  of  the  timber.  The 

"These  yield  tables,  prepared  by  E.  J.  Hanzlik  of  the  U.  S.  Forest  Service  are 
as  yet  only  In  manuscript  form.     (See  page  5.) 


323444 


charge  against  the  growing  timber  for  one  rotation,  or  single  crop,  is 
therefore  not  the  soil  value,  but  only  the  interest  on  that  value  for  the 
term  of  years  it  takes  the  timber  to  grow.  Since  the  timber  is  not  an  annual 
product,  the  interest  cannot  be  secured  annually,  but  must  accumulate  until 
the  timber  is  cut.  Hence  compound  interest  is  used.  What  this  will  amount 
to  at  rates  applicable  to  forestry  will  be  discussed  later,  and  shown 
specifically  in  the  tables  forming  part  of  this  discussion. 

Cost  of  Stocking  Land  With  Trees 

While  space  is  not  here  available  to  take  up  in  detail  the  cost  of  stock- 
ing the  land,  there  is  good  evidence,  that  $5.00  per  acre  is  a  fair  average 
figure.  Although  planting  on  a  bare  area  will  cost  nearer  $10.00,  few  areas 
need  be  chosen  which  do  not  bear  some  young  growth  or  contain  some  seed 
trees  which  will  assist  artificial  regeneration.  Areas  that  have  not  been 
cut  over  can  seldom  be  stocked  any  cheaper  by  natural  regeneration  than 
by  planting,  since  the  value  of  the  seed  trees  that  must  be  left  will  usually 
bring  the  cost  up  to  the  average  figure  mentioned  above  unless  there  are  an 
unusually  large  number  of  worthless  trees  of  the  desired  species  which  may 
be  used  as  seed  trees.  A  skillful  combination  of  planting  with  natural 
regeneration  from  stands  not  yet  cut,  and  artificial  regeneration  by  planting 
or  seeding  should  bring  the  operation  within  this  cost. 

Unlike  the  land  cost,  the  expense  of  stocking  the  land  with  trees  has 
to  be  repeated  every  time  the  timber  is  cut.  This  amount  must,  therefore, 
be  charged  against  the  product  of  each  planting. 

Interest  on  Cost  of  Stocking  Land 

The  interest  on  the  cost  of  stocking  the  land  might  have  been  included 
with  the  foregoing  item,  but  it  is  here  treated  separately  in  order  that  all 
interest  charges  under  various  kinds  of  ownership  may  be  segregated.  As 
in  the  case  of  interest  on  the  land  value,  compound  interest  must  be  used. 
The  amount  of  this  item  at  various  rates  will  be  shown  specifically  in 
tables  forming  part  of  this  discussion. 

The  Annual  Cost  of  Administration  and  Protection 

Kellogg  and  Ziegler  maintain  that  the  annual  cost  of  administration 
and  protection  can  be  handled  for  five  cents  per  acre.*  An  analysis  of  the 
actual  conditions  will  show  that  five  cents  is  not  sufficient  for  safety.  It 
must  be  remembered  that  this  includes  office  expense,  supervision,  fire  patrol, 
patrol  against  trespass,  and  all  other  overhead  expenses.  Although  forest 
fire  insurance  is  not  at  present  one  of  the  expense  charges  included  in  this 
Item,  the  practicability  of  insuring  forests  by  an  enlargement  of  the 
scope  of  the  forest  fire  protective  organizations  is  such  that  it  is  bound 
to  come  in  the  near  future.  Hence  this  figure  should  also  be  high  enough 
to  include  forest  fire  insurance.  In  the  case  of  the  state  or  the  federal 
government,  the  losses  from  fire  must  be  charged  to  this  item.  Whatever 
amount  accumulates  between  planting  and  cutting  a  single  crop  must  be 
charged  to  that  crop.  The  writer  does  not  therefore,  believe  that  the  low 
figure  generally  assigned  to  the  annual  cost  of  administration  and  pro- 
tection is  sufficient,  but  will  assign  20  cents  per  acre  per  annum  as  a 
reasonable,  though  entirely  sufficient  amount.  The  total  first  cost,  or 
principal  sum  of  this  item  per  acre  charged  to  a  single  crop  of  trees 
*"Cost  of  Growing  Timber,"  by  R.  S.  Kellogg  and  E.  A.  Ziegler. 


will  be  the  annual  charge   (20c)   multiplied  by  the  number  of  years  the 
crop  takes  to  grow. 

Interest  on  Administration  Costs 

Compound  interest  at  the  chosen  rate  on  each  annual  amount  from 
the  time  it  is  expended  until  the  timber  is  cut  must  be  calculated.  This 
may  be  done  by  compound  interest  formulae,  or  taken  from  such  tables 
as  those  in  Schenk's  "Forest  Finance."*  The  specific  amounts  under 
certain  conditions  will  be  considered  later. 

Annual  Taxes 

The  annual  taxes  is  a  difficult  item  to  foresee.  At  present  taxes  in 
Washington  are  all  considered  under  the  general  property  tax  (a  most 
unscientific  system)  averaging  perhaps  1  per  cent  to  2  per  cent  on  the 
actual  value  of  the  property.  Since,  owing  to  the  urgent  need  of  schools, 
roads,  etc.,  in  a  pioneer  community,  and  the  absence  of  improved  prop- 
erty, taxes  may  now  be  thought  to  be  high.  A  rate  of  1  per  cent  on  the 
actual  value  of  the  property  may  perhaps  be  considered  a  fair  figure 
when  the  future  is  to  be  taken  into  consideration. 

Even  if  this  figure  is  conceded  fair,  our  difficulties  have  really  just 
begun  because  of  the  changes  in  value  that  will  take  place  with  time,  due 
to  the  growth  of  the  stand  and  to  changing  land  values  and  stumpage 
prices,  to  say  nothing  of  continual  changes  in  assessment  methods.  The 
following  figures  are,  however,  intended  to  represent  a  fair  approximation 
of  the  values  to  be  expected  on  Quality  I  Forest  Soil,  which,  as  already 
stated,  is  considered  to  be  worth  $10.00  per  acre. 

(1)  Up  to  the  20th  year  of  the  stand  only  the  soil  value  of  $10.00 
per  acre  would  generally  be  considered  by  assessors.     During  this  period 
the  taxes  at  1  per  cent  would  be  10  cents  per  acre. 

(2)  From  the  21st  to  the  30th  years  of  the  stand  perhaps  $10.00 
per  acre  might  be  added  to  the  valuation  because  of  the  young  stand, 
making  taxes  20  cents  per  acre  per  annum. 

(3)  From  the  31st  to  the  40th  years  of  the  stand,  since  it  is  not  yet 
in  the  saw  timber  class,  it  can  best  be  estimated  in  cubic  feet.     It  will 
now   contain    (on   Quality    I    Soil)    4,000   cubic    feet   per   acre,   or   about 
40   cords,   which  as   pulpwood  would  be   worth,   say   50   cents   per  cord, 
bringing  the  total  value  of  land  and  timber  up  to  $30.00  per  acre  and 
the  tax  to  30  cents  per  acre  per  annum  during  this  period. 

(4)  From   the   41st  to   the   50th   years   the   volume   will   be   about 
20,000  ft.  B.  M.  per  acre,  worth  on  the  average   (considering  increased 
stumpage  prices  in  the  future)  at  least  $3.00  per  M.,  or  $60.00  for  the 
whole  stand.     Hence  soil  and  timber  would  be  worth  $70.00  per  acre  and 
the  annual  tax  70  cents. 

(5)  From  the  51st  to  the  60th  years  the  stand  would  contain  an 
average  of  about  35,000  ft.  B.  M.,  with  a  stumpage  value  of  say  $8.00 
per  M.,  hence  the  total  value  of  stand  and  soil,  $290.00,  and  the  annual 
tax  $2.90  per  acre.  y 

To  recapitulate,  the  taxes  on  Quality  I  Forest  Soil  by  the  general 
property  tax  are  estimated  somewhat  as  follows: 

1st  to  20th  years,      10  cents  per  acre  per  annum. 

21st  to  30th  years,      20  cents  per  acre  per  annum. 

31st  to  40th  years,      30  cents  per  acre  per  annum. 

41st  to  50th  years,      70  cents  per  acre  per  annum. 

51st  to  60th  years,  2.90  cents  per  acre  per  annum. 


*"Forest  Finance,"  by  C.  A.   Schenk. 


Considering  the  smaller  volumes  and  poorer  qualities  with  the  Quality 
II  soil  the  taxable  values  would  be  worth  only  about  two- thirds  as  much, 
and  with  Quality  III  soil  one-third  as  much;  hence  taxes  may  be  assumed 
to  be  only  two-thirds  and  one-third  as  much  respectively,  both  as  to  first 
cost  and  interest  accumulated.  Taxation  will  be  further  discussed  on 
the  basis  of  the  cost  tables  forming  part  of  this  discussion,  after  those 
tables  are  presented. 

Interest  on  Taxes  Under  General  Property  Tax 

Compound  interest  must  be  computed  on  the  amounts  paid  in  taxes 
from  the  time  paid  until  the  timber  is  mature.  The  specific  amounts  de- 
pend on  the  interest  rates  and  the  age  to  which  timber  is  held,  and  will 
be  considered  hereafter. 

Matters  Which  Influence  the  Above  Elements  of  Cost 

(a)  Ownership.      The   chief   classes   of   forest  owners   as   affecting 
these  elements  are  the  federal  government,  the  state,  municipalities,  large 
corporations,  small  corporations,  and  individuals.    The  chief  items  affected 
by  ownership  are: 

(b)  Taxes.     The  federal  government  pays  25  per  cent  of  the  gross 
yield  directly  to  the  states  and  expends  another  10  per  cent  on  roads,  but 
as  the  roads  are  of  equal  value  to  the  forests  only  the  25  per  cent  paid 
to  the  states  will  be  considered  as  a  gross  yield  tax.     Lands  owned  by 
states  and  municipalities  are  also  in  a  sense  not  subject  to  tax,  but  in 
another  sense  if  we  assume  that  the  land  would  be  worked  under  forest 
management  either  publicly  or  by  private  owners  we  may  conclude  that 
the  state  and  municipality  will  lose  tax  revenue  by  reason  of  their  land 
ownership,  because  of  withdrawing  lands  from  taxation,  and  must  there- 
fore make  up  from  their  forest  revenue  the  deficit  in  their  general  fund 
as  discussed  hereafter. 

If  the  federal  government  and  the  private  owner  pay  25  per  cent 
of  the  gross  yield  of  the  forest  for  taxes,  the  state  and  municipality  should 
set  aside  25  per  cent  of  the  gross  forest  revenue  from  stumpage  for  their 
general  fund.  If  the  municipality  is  the  owner  it  might  be  required  to  pay 
the  state  such  a  part  of  the  25  per  cent  set  aside  as  the  state's  share  of  the 
taxes  amounts  to,  and  which  will  otherwise  be  lost  by  holding  the  land  in 
public  ownership.  If  the  state  were  the  owner  it  should  pay  the  munic- 
ipality, or  local  taxing  body  its  proper  share  of  the  25  per  cent.  Of  course 
in  practice  this  system  of  book-keeping  might  not  be  carried  out  in  detail, 
but  in  effect  it  would  be,  if  the  practice  of  forestry  proceeded  profitably. 

(c)  Interest.     This  varies  more  widely  with  ownership  than  taxes. 
The   fact  that  individuals,  states,  and  the  nation  have  to  pay  different 
rates  is  so  well  known  as  to  need  little  comment  except  to  name  an  aver- 
age rate   for  each.     The  writer  considers   the   following  a   fair  average 
rate  for  each  class  of  owner: 

Federal  Government 3       per  cent. 

Sfate   (Washington)    4       per  cent. 

Municipality    4  %   per  cent. 

Large   Corporation    4  %   to  5  per  cent. 

Moderate  Sized  Corporation 6       per  cent. 

Small  Corporation  and  Individual 7       per  cent. 

Naturally  no  owner  will,  from  the  standpoint  of  financial  invest- 
ment, care  to  engage  in  forestry  unless  he  can  make  as  high  a  per  cent 
on  his  capital  as  he  will  have  to  pay  for  borrowed  capital,  or  at  which 


he  can  lend  his  money.    Hence  the  above  rates  will  be  used  in  calculations. 

(d)  Length  of  Time  Between  Planting  and  Harvest.  This  in- 
fluences the  amount  to  which  the  interest  charges  on  the  various  items 
will  accumulate.  In  previous  calculations  the  writer  has  found  the  best 
available  evidence  seems  to  indicate  about  60  years  as  giving  the  highest 
profits  from  the  use  of  the  soil  for  private  forestry,  while  80  to  100  years 
is  more  profitable  for  government  forestry.  In  order  to  make  a  comparison 
as  favorable  as  possible  to  private  forestry,  60  years  is  chosen  for  the 
length  of  rotation.  Specific  costs  are  figured  on  this  basis  using  the 
various  interest  rates  already  named. 

Influence  of  Yield  Per  Acre  on  Costs  Per  Thousand  Board  Feet. 
Except  for  the  interest  on  the  soil  value  and  the  taxes  with  interest  there- 
on, the  foregoing  elements  of  cost  per  acre  will  not  vary  widely  on  dif- 
ferent qualities  of  soil.  It  is,  of  course,  common  knowledge  that  the  yield 
on  different  soil  qualities  will  vary  greatly.  This  variation  is  even  greater 
than  generally  supposed.  The  United  States  Forest  Service  has  made  a 
careful  study  of  this  subject  in  Western  Washington  and  Oregon,  the 
results  of  which  have  unfortunately  only  in  part  been  published.  In  this 
study  measurements  were  taken  of  stands  on  a  wide  variety  of  soils 
which  were  classified  into  three  qualities  on  the  basis  of  the  yields  found. 
Quality  I  or  first  quality  44  M.  per  acre,  Quality  II  or  medium  quality  32 
M.  feet  per  acre  and  Quality  III  or  poorest  quality  16%  M.  feet  per  acre 
for  the  same  period.  Obviously,  then,  if  the  cost  per  acre  of  growing  the 
timber  remains  little  changed  for  the  different  qualities  the  cost  per  1,000 
feet  B.  M.  will  be  much  less  in  the  case  of  large  yields,  just  as  would  be 
the  case  in  an  agricultural  crop.  These  results  are  brought  out  in  tables 
about  to  follow,  in  which  the  yields  shown  by  the  U.  S.  Forest  Service 
study  are  used  as  authoritative. 

Results  of  Foregoing  Elements  Presented  in  Tabular  Form.  The 
definite  results  of  the  foregoing  elements  have  been  worked  out  mathe- 
matically for  each  item  and  are  presented  in  the  following  tables  in  order 
to  show  their  relationships,  and  make  comparisons  of  different  interest 
rates  and  tax  systems  as  simple  as  possible.  The  itemized  and  total  costs 
to  owners  working  under  different  interest  rates  are  presented  in  a  single 
table  for  each  of  the  soil  qualities  already  mentioned.  Costs  on  Quality 
I  soil  are  presented  in  Table  I,  on  Quality  II  soil  in  Table  III,  and  on 
Quality  III  soil  in  Table  V.  The  intervening  tables  present  summaries 
of  those  mentioned  in  which  the  first  costs,  the  interest  charges  and  the 
tax  costs  are  segregated  and  their  percentage  relations  to  each  other 
computed. 

On  Quality  II  forest  soil  the  costs  per  acre  are  reduced  slightly 
owing  to  lesser  soil  value,  and  hence  to  less  taxes  due  to  the  lower  soil 
value  and  the  smaller  volume  of  stand  of  timber.  The  land  is  considered 
worth  $5.00  and  the  taxes  to  be  two-thirds  of  what  they  were  on  Quality 
I.  The  yield  according  to  yield  tables  prepared  by  the  U.  S.  Forest 
Service  will  be  32,000  ft.  B.  M.  per  acre  at  60  years.  The  costs  will  be 
as  shown  for  different  owners  in  Table  I. 

Comparing  Table  III  with  Table  I,  it  is  seen  that  where  interest 
rates  are  low,  costs  per  acre  are  not  reduced  much  below  Quality  I,  but 
as  yield  is  less  the  cost  per  M.  is  raised,  except  in  the  case  of  6  per 
cent  and  7  per  cent  interest  rates.  Where  interest  is  high,  reduction  in  land 


TABLE    I. 

Estimated  average  costs  per  acre  and  per  M.  feet  B.  M.  of  growing 
Douglas  fir  on  Quality  I,  or  best  quality  forest  soil,  under  a  60  year  rotation, 
computed  for  interest  rates  securable  by  various  classes  of  owners. 


0 

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Hi 

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m 

G)  ^*                 C  ^ 

fe 

02                       S 

3 

S              ra 

Estimated  interest  rate 
for  various  classes  of 
owners 3%  4%  4V2%  5% 6% 7% 

'Compound      interest      on 

$10.00     soil    value,     60 

years    f   48.91     $95.19      $130.27     $176.79      $319.88      $     569.48 

Cost      of      stocking      land 

with  young  trees   ....        5.00  5.00  5.00  5.00  5.00  5.00 

Compound       interest       on 

cost   of    stocking    24.46          47.59          65.14          88.40        159.94  284.74 

Sum    of     annual     charges 

for        administration 

and     protection      (20c 

per       year       for       60 

years)    12.00          12.00          12.00          12.00          12.00  12.00 

**Interest  on  all  amounts 

spent    on    administra- 
tion     and      protection 

from  time  incurred  to 

time   of   cutting    20.61          35.60          45.90          58.71          94.62  150.71 

Taxes         under        general 

property      tax      when 

owner        subject        to 

them 43.00          43.00  43.00 

Interest     on     taxes     from 

time    planted    to    time 

of   cutting  timber    ***52.04          77.40  114.42 

Yield  tax  of  25%  on  final 

product   f36.99        f65.13        f86.10      

Total    per    acre     $147 . 97     $260.51     $344.41     $435.94     $711.84     $1,179.35 

Cost  per  M.  when  product 
is  44  M.  per  acre.  The 
probable  yield  as 
shown  by  U.  S.  F.  S. 
yield  tables  $  3.37  $  5.92  $  7.83  $  9.91  $  16.17  $  26.80 

*See  interest  table  in  Schenck's  Forest  Finance,  Column  IV. 

**See  interest  table  in  Schenck's  Forest  Finance,  Column  V. 

**There  are  at  least  two  methods  of  computing  compound  interest  on  the 
taxes.  The  simplest  method  for  purposes  of  this  discussion  is  to  analyze  as 
follows,  using  the  5  per  cent  column  in  Table  I.  Consider  that  from  the  1st 
to  the  60th  year,  lOc  per  annum  is  paid  for  taxes.  Referring  to  an  interest 
table,  we  find  that  compounded  for  60  years  this  accumulates  to  $35.36,  includ- 
ing principal  and  interest.  Beginning  with  the  20th  year,  an  additional  lOc 
per  acre  is  paid  for  the  remiander  of  the  rotation,  or  40  years.  This  amounts 
to  $12.08  during  the  40  years.  Beginning  with  the  30th  year,  another  lOc  is 
added  to  taxes  for  the  remainder  of  the  rotation.  This  accumulates  to  $6.64  in 
the  remaining  30  years.  Beginning  with  the  40th  year,  40c  is  added  to  taxes 
for  the  remainder  of  the  rotation.  This  accumulates  to  $13.24  in  the  20  years. 
Finally  in  the  50th  year  $2.20  more  is  added  to  the  taxes,  which  in  the  10 
years  remaining  accumulates  to  $27.72.  The  total  taxes  and  interest  thereon 
for  the  rotation  amount  to  $35.36  plus  $12.08  plus  $6,64  plus  $13.24  plus  $27.72 
equals  $95.04,  the  total  accumulated  taxes,  both  principal  and  interest.  Take 
therefrom  $43.00,  the  principal  sums  paid,  and  there  remains  $52.04,  the  accu- 
mulated interest  on  the  taxes. 

fThis  figure  represents  the  cost  to  the  owner  of  a  25%  yield  tax  when  the 
various  items  of  cost  of  production  are  as  shown  in  the  same  columns.  Since  a 
25  per  cent  yield  tax  takes  25  per  cent  of  the  product,  it  is  evident  that  the 
cost  of  the  the  tax  to  the  owner  would  be  one-fourth  of  the  total  cost  of 
production,  including  taxes.  All  the  costs  aside  from  the  yield  tax  would  then 
amount  to  three-fourths  of  the  total  cost  and  the  yield  tax  would  be  one-third 
of  the  other  costs.  It  is  thus  that  the  cost  of  the  yield  tax  is  computed  in 
these  tables,  that  is  to  say,  one-third  of  the  costs  aside  from  taxes  is  the  cost 
of  the  25  per  cent  yield  tax  in  each  case.  In  case  stumpage  sells  at  more  than 
the  cost  of  production  all  the  profits  on  25  per  cent  of  the  yield  go  to  the  state 


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and  profits  will  be  made  by  the  owner  only  on  the  75  per  cent  remaining  to 
him.  That  is,  the  figures  shown  in  these  tables  represent  the  cost  of  the  tax, 
but  its  actual  amount  will  depend  on  the  stumpage  values  at  the  time  of 
cutting.  __ 

value  brings  about  a  much  lessened  interest  charge  so  that  costs  are  re- 
duced more  than  yield.  This  results  in  a  slightly  smaller  cost  per  M. 
on  this  Quality  of  soil. 

On  Quality  III  forest  soil  the  costs  per  acre  are  again  reduced 
slightly,  owing  to  reductions  in  soil  value  and  in  taxes  due  to  a  lower  soil 
value  and  a  smaller  stand  of  timber.  The  land  is  considered  worth  $2.00 
and  the  taxes  to  be  one-third  of  what  they  were  on  Quality  I.  The  yield 
will  be  only  16,500  feet  per  acre  at  60  years,  according  to  Douglas  fir 
yield  tables  by  E.  J.  Hanzlik,  of  the  United  States  Forest  Service.  The 
costs  of  artificial  planting  would  be  increased  on  Quality  III  because  of  the 
unfavorable  soil  conditions  and  also  because  trees  should  really  be  planted 
thicker.  On  account  of  the  low  yield  per  acre  natural  regeneration  might 
be  the  most  profitable. 

The  costs  for  different  owners  are  shown  in  Table  V. 

TABLE    III. 

Estimated  average  costs  per  acre  and  per  M.  ft.  B.  M.  of  growing  Douglas 
fir  on  Quality  II  or  medium  quality  forest  soil  under  a  60  year  rotation,  com- 
puted for  interest  rates  securable  by  various  classes  of  owners. 


Ss  a  2-        ft£ 

•3  o  «o  o^ 

-  a  °  fl£  °.S 

I    i   i    i   ft  P 

&  OJ  S  J <3 W 

Estimated  interest  rate 

paid  by  owner 3%  4%  4%%  5% 6% 7% 

Compound  interest  on  es- 
timated soil  value 
($5.00),  60  years $24.46  $47.60  $65.14  $88.40  $159.94  $284.74 

Cost  of  stocking  land  with 

young  trees 5.00  5.00  5.00  5.00  5.00  5.00 

Compound  interest  for  60 
years  on  cost  of  stock- 
ing land 24.46  47.60  65.14  88.40  159.94  284.74 

Sum  of  annual  charges  for 
administration  and  pro- 
tection for  60  years 
(20c  per  acre  per  an- 
num)    12.00  12.00  12.00  12.00  12.00  12.00 

Compound  interest  on  all 
amounts,  spent  on  ad- 
mininstration  and  pro- 
tection from  the  time 
incurred  to  time  of  cut- 
ting   20.61  35.60  45.90  58.71  94.62  150.71 

Taxes  under  general  prop- 
erty tax **28.66  **28.66  **28.66 

Interest  on  Taxes **34.70     **51.60     **76.28 

Yield  tax  25%  on  final 

product  *28.84  *49.27  *64.39  

Total    per   acre    $115.37     $197.07     $257.57     $315.87     $511.76     $842.13 

Total  cost  per  M.  on  basis 
of  32  M.  per  acre  yield 
in  60  years  $  3.61  $  6.16  $  8.05  $  9.87  $  16.00  $  26. SI 

*See  foot-note  under  Table  I. 

**Since,  as  stated  on  page  5,  the  value  of  the  yield  on  Quality  II  soil,  though 
three-fourths  as  much  in  quantity,  will  on  account  of  the  smaller  sized  timber 
not  be  more  than  two-thirds  as  much  in  value  as  the  yield  on  Quality  I,  the 
taxes  have  been  assumed  to  be  only  two-thirds  as  great.  These  figures  for 
both  the  taxes  and  the  interest  thereon  have  therefore  been  derived  directly 
from  corresponding  values  in  Table  I  by  computing  two-thirds  of  each  value 
there  as  the  correct  figure  for  this  table. 


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INFLUENCE  OF  THINNINGS 

On  Quality  I  Soil.  Where  thinnings  are  possible  the  costs  may  be 
reduced  by  utilizing  thinnings  about  the  30th,  40th,  and  50th  years. 
Other  studies  by  the  writer,  based  on  number,  volume,  size,  etc.,  of  trees 
per  acre  shown  by  Forest  Service  yield  tables,  would  seem  to  indicate 
pretty  clearly  that  on  Quality  I  soil,  timber  of  at  least  the  values  in- 
dicated in  Table  VII,  may  be  removed  in  thinnings  where  they  are  util- 
izable.  There  is  furthermore  very  little  doubt  that  all  thinnings  from 
young  stands  originated  now  or  hereafter  may  be  utilized  because  even 
now  demands  for  pulpwood,  ties,  and  mine  timbers  are  capable  of  using 
all  of  this  type  of  timber  within  easy  reach  of  transportation. 

Tables  VII,  VIII,  and  IX  show  possible  deductions  from  cost  due  to 
this  source  of  income,  but  the  data  along  this  line  are  not  as  reliable  as 
other  cost  data  because  of  uncertainty  as  to  the  future  price  of  wood. 

TABLE   V. 

Estimated  average  costs  per  acre  and  per  M.  ft.  B.  M.  of  growing  Douglas 
flr  on  Quality  III,  or  poorest  quality,  forest  soil  under  a  60  year  rotation, 
computed  for  interest  rates  securable  by  various  classes  of  owners. 


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Interest  rate  

3% 

4% 

4%^" 

5% 

6% 

7% 

/2  / 

Compound  interest  on  soil 
value  ($2.00)  for  60 
years  $  9.78  $  19.03  $  26.05  $  35.36  $  63.96  $113.90 

Cost  of  stocking  with 

young  trees 5.00  5.00  5.00  5.00  5.00  5.00 

Compound  interest  on  cost 

of  stocking 24.46  47.60  65.14  88.40  159.94  284.74 

Sum  of  annual  charges  for 

administration 12.00  12.00  12.00  12.00  12.00  12.00 

Compound  interest  on  all 
amounts  spent  for  ad- 
ministration and  pro- 
tection from  time  in- 
curred to  time  of  cut- 
ting   20.61  35.60  45.90  58.71  94.62  150.71 

Taxes  under  general  prop- 
erty tax — when  owner 
is  subject  to  them **14.33  **14.33  **14.33 

Compound  interest  on 

taxes  **17.35  **25.80  **38.14 

Taxes  under  25%  yield  tax. 

Final  product  *23.95  *39.74  *51.36  

Total   cost   per   acre    ..$  95.80     $158.97     $205.45     $231.15     $375.65     $618.82 

Total  cost  per  M.  on  basis 
of  yield,  per  acre,  in 
60  years,  16,500  ft.  B.  M.$  5.80  $  9.64  $12.45  $14.01  $22.77  $37.50 


*See  footnote   (**),   Table  I. 

**As  stated  on  page  8  the  value  of  the  yield  on  Quality  III,  or  poorest 
quality  forest  soil,  will  not  be  more  than  one-third  that  on  Quality  I  soil, 
hence  the  taxes  under  general  property  tax  may  be  assumed  to  be  only  one- 
third  as  great.  These  figures  for  both  taxes  and  interest  thereon  have, 
therefore,  been  derived  directly  from  corresponding  values  in  Table  I  by 
computing  one-third  of  each  value  there  given  as  the  correct  figure  for  this 
table. 

10 


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11 


On  Quality  II  Soil.  The  volume  of  the  thinnings  to  be  obtained  on 
Quality  II  soils  may  be  expected  to  bear  the  same  proportionate  relation 
to  the  volume  of  thinnings  on  Quality  I  as  their  respective  total  stands, 
i.  e.,  as  32,000  is  to  44,000,  or  8  to  11.  The  thinnings  on  Quality  II  soil, 
however,  will  be  of  smaller  sizes,  hence  less  valuable.  It  seems  safe 
therefore,  to  assume  that  the  total  value  will  not  be  more  than  one-half 
as  great.  Hence  these  thinnings  will  be  expected  to  make  only  one-half 
as  much  from  the  total  costs  as  on  Quality  I  soil. 

The  amount  to  be  deducted  from  the  total  costs  per  acre  on  Quality 
II  soils  because  of  the  thinnings  may  then  be  determined  directly  by 
taking  half  the  values  deduced  for  thinnings  and  interest  on  Quality  I 
soils  as  shown  in  Table  VII.  Table  VIII  shows  these  amounts  per  acre 
and  the  resulting  amounts  per  M.  ft.  B.  M. 

On  Quality  III  Soil.  The  volume  of  the  thinnings  to  be  expected 
from  the  Quality  III  soils  may  be  determined  by  proportion  just  as  they 
were  for  the  Quality  II  soils.  In  this  case  it  would  be  as  l6l/2  is  to  44. 
As  a  matter  of  fact,  however,  the  small  sizes  grown  on  Quality  III  soil 
would  greatly  lessen  the  value  of  the  yield  from  thinnings  so  that  it  may 
be  doubted  whether  this  would  exceed  one-third  of  the  value  of  Quality  I. 
Assuming  it  has  one-third  the  value  of  the  Quality  I  thinnings,  the  values 
of  thinnings  per  acre  with  interest  thereon  for  Quality  III  may  be  taken 
directly  as  one-third  of  the  corresponding  values  in  Table  VII. 

TABLE    VII. 
Possible  Deductions  From  Costs  Due  to  Thinnings — Douglas  Fir — Quality  I  Soil 


! 

ITEMS—  O 


2                                     o                  $ 

fill 

.2* 

^a 

3| 

&               oa                8                5 

S 

s 

Interest 

rate    

3% 

4%            4^ 

i%             5% 

6% 

7% 

Value  of  30th  year,  thin- 
ning— 4  cords  pulp- 
wood  at  50  cents  per 
cord $  2.00  $  2.00  $  2.00  %  2.00  $  2.00  $  2.00 

Accumulated  interest  on 
this  value,  30th  year  to 
60th  year  2.84  4.48  5.48  6.64  9.48  13.22 

40th  year  thinning — 5  cords 
pulpwood  worth  $1  per 
cord  stumpage 5.00  5.00  5.00  5.00  5.00  5.00 

Accumulated  interest  for  20 

years 4.05  5.95  7.05  8.25  11.03  14.35 

50th  year  thinning — 10 
cords  pulpwood  worth 
$1.00  per  cord 10.00  10.00  10.00  10.00  10.00  10.00 

Accumulated  interest  for  10 

years 3.40  4.80  5.53  6.29  7.90  9.67 

Total  amount  saved  per 
acre  when  thinnings 
are  utilized  $  27.29  $  32.23  $  35.06  $  38.18  $  45.41  $  54.24 

Amount  saved  per  M.  ft.  B. 
M.  when  final  yield  is 
44  M.  per  acre  *  .62  $  .75  %  .79  $  .87  $  1.03  $  1.23 


12 


TABLE   VIII. 
Possible   Savings   in   Cost   Due  to   Thinnings  on   duality   II   Soil 

~§ I  i7 

•M  o  J3  K 

S  -o  25 

">  >>  0)  O  — 

o  ft  ft  £* 

ITEMS—  O  « § 

«  nr,  o  c 


s 
i 
i 

1 

02 

3 

0) 

bo 
c 

rt 

1 

p 

02 

Interest  rate   

3% 

4% 

4V  % 

5% 

6% 

7% 

Total  amount  saved  per 
acre  when  thinnings 
are  utilized  $  13.64  $  16.11  $  17.53  $  19.09  $  22.70  $  27.12 

Amount  saved  per  M.  ft.  B. 
M.  when  final  yield  is 
32  M.  per  acre  $  .42  $  .50  ?  .55  $  .59  $  .71  $  .85 

TABLE    IX. 
Possible   Savings   on   Cost   Due   to   Thinnings   on   Quality   III   Forest   Soil 


s  $        § 

ITEMS—  O  g 

-  ft  « 


c 

0 

<D 

3  g 

p-"O 

"3 

C 

bo 

^o 

3s 

i 

02 

§ 

5 

<B  ft 

gcj 
02 

Interest  rate   

3% 

4% 

4y2% 

5% 

6% 

7% 

Total  amount  saved  per 
acre  when  thinning's 
are  utilized  ...........  $  9.09  $10.74  $  11.68  $  12.73  $  15.14  $  18.08 

Amount  saved  per  M.  ft.  B. 
M.  when  final  yield  is 

M.  per  acre  .......  $        .55     $        .65     $        .70     $        .77     $        .91     $     1.09 


Certain  Modifications  of  Costs 

In  General  :  It  is  believed  that  the  costs  given  in  the  preceding  tables 
represent  as  fair  averages  of  the  cost  of  growing  timber  by  means  of 
good  forestry  practice  as  can  be  given  for  the  conditions  on  the  west  side 
of  the  Cascades  in  the  Pacific  Northwest.  It  is,  however,  obvious  that 
average  figures,  no  matter  how  correct,  cannot  be  applied  directly  to  all 
individual  cases.  In  so  far  as  the  first  costs  in  a  specific  case  are  known 
to  be  susceptible  of  modification,  the  final  costs  may  be  enormously  modi- 
fied. For  example,  it  is  entirely  probable  that  much  land  which  is  already 
stocked  with  young  growth  could  at  the  present  time  be  bought  at  the 
rates  specified  in  the  tables,  thus  saving  the  cost  of  stocking  entirely  and 
perhaps  several  years'  interest  on  other  costs.  This  would  greatly  increase 
the  possibilities  of  profit  on  the  area  in  question,  because  in  forestry  every 
dollar  saved  at  the  beginning  of  the  rotation  may  mean  from  $5.00  to 
$50.00  at  the  end,  according  to  the  interest  rate.  Likewise  land  already 
stocked  with  timber  might  be  bought  below  the  price  specified,  in  which 
case,  still  more  could  be  saved. 


13 


Certain  owners  might  save  all  or  portions  of  other  costs,  or  find  them 
properly  chargeable  to  other  lines  of  business  which  they  conduct.  Thus 
a  coal  mining  company  might  find  it  necessary  to  hold  a  large  area  of 
coal  lands,  the  surface  of  which  is  unsuited  to  agriculture,  or  other  use 
except  forestry.  In  this  case  it  would  be  fair  to  charge  all  the  land 
value  to  the  coal,  thus  removing  the  heavy  interest  cost  on  land  value 
from  the  forestry  costs.  On  Quality  I  soil  this  would  remove  a  charge 
of  $4.02  per  M.  from  the  cost  of  producing  timber  if  the  company  worked 
with  5  per  cent  money.  This  would  enable  a  company  of  this  sort  to 
produce  timber  as  cheaply  as  the  state. 

In  municipal  forestry,  a  city  finding  it  necessary  to  own  land  for 
watershed  protection  might  practice  forestry  without  charging  interest  on 
land  value  to  it,  and  might  also  charge  a  large  part  of  the  actual  admin- 
istration cost  to  the  water  department  because  sanitary  patrol  is  neces- 
sary anyway.  This  would  reduce  the  cost  of  raising  timber  to  a  city 
below  the  average  cost  shown  by  the  federal  government,  and  make  the 
industry  one  of  great  direct  financial  benefit. 

When  it  is  remembered  that  the  logging  and  manufacture  of  this  tim- 
ber means  that  upwards  of  $8.00  is  paid  out  in  wages  for  every  thousand 
feet  of  timber  manufactured,  and  that  the  city  consumer  may  as  a  result 
of  the  local  timber  supply  get  the  manufactured  product  cheaper,  where 
the  city  already  owns  its  watershed,  no  other  argument  for  city  forestry 
is  necessary.  To  put  the  case  in  another  way,  it  may  be  stated  that 
since  the  average  acre  of  forest  soil  will  in  this  region  produce  about  500 
feet  of  timber  per  annum,  any  city  which  practices  forestry  will  for  the 
average  acre  thus  kept  in  forest  produce  raw  material  which  will  some 
time  insure  the  payment  of  $4.00  or  more  in  wages  for  each  year  the 
land  is  kept  producing  forests.  One  hundred  and  fifty  acres  kept  in 
forest  will  support  at  least  the  equivalent  of  one  laborer  and  his  family 
permanently,  besides  paying  a  handsome  profit  to  the  city.  Municipal 
forests  of  this  type  are  common  in  Europe,  where  profits  as  high  as 
$12.00  per  acre  per  annum  are  now  made.  Of  course,  no  such  profit  is 
possible  at  present  in  this  country,  but  America  is  already  well  on  the 
road  to  this  condition. 

Large  Corporations 

The  large  corporation  can  practice  forestry  because  of  its  low  in- 
terest rate  and  the  economies  in  administration  and  protection  due  to  the 
ownership  of  large  areas.  Where  it  has  holdings  in  several  localities  its 
fire  losses  will  not  exceed  the  average  losses  of  the  community,  so  it  will 
be  cheaper  for  it  to  carry  its  own  insurance  than  to  pay  premiums  to 
a  forest  fire  insurance  company,  even  when  the  time  comes  that  forest  fire 
insurance  is  available.  Even  a  heavy  fire  loss  would  not  cause  a  corre- 
spondingly heavy  immediate  expenditure,  as  when  a  mill  is  destroyed,  but 
would  be  made  up  gradually  in  growing  a  new  crop.  In  spite  of  these 
facts  the  large  corporation  is  not  yet  convinced  that  forest  production 
would  be  profitable  for  it,  although  a  study  of  the  question  gives  convinc- 
ing indications  that  it  would  be  so,  especially  in  the  case  of  corporations 
which  desired  to  make  their  life,  and  hence  their  investments,  perpetual. 
However,  the  present  political  efforts  looking  toward  the  destruction  of 
all  large  business  enterprises  may  result  in  disintegrating  these  corporations 
so  that  their  efficiency  and  command  of  capital  will  be  so  decreased  as  to 

14 


put  them  out  of  the  class  which  might  practice  forestry  successfully.  Un- 
til these  political  questions  are  settled,  therefore,  it  would  probably  be 
unwise  for  the  large  corporation  to  engage  in  an  enterprise  involving  a 
continuous  policy  for  so  long  a  time  as  is  required  in  forest  production. 

Railroad  corporations  not  being  so  subject  to  this  destructive  action 
by  government,  because  the  problem  of  handling  these  natural  monopolies 
is  largely  settled,  do  not  labor  under  this  latter  disadvantage,  though 
possessed  of  the  other  advantages  of  large  corporations.  They  have  also 
at  least  three  additional  advantages  which  would  make  it  profitable  to 
engage  in  forest  production  on  lands  already  owned.  The  first  is  that 
they  are  large  consumers,  and  the  cheapest  possible  supply  of  timber 
is  of  enormous  importance  to  their  construction  and  maintenance  depart- 
ments. The  second  follows  from  this  that  since  they  are  large  consumers 
practically  all  selling  costs  would  be  saved  to  their  forestry  departments. 
The  third  reason  lies  in  the  fact  that  the  railroad  depends  on  adjacent 
territory  for  tonnage.  Land  adapted  only  to  forestry  will  yield  little 
tonnage  any  other  way,  but  as  already  stated  in  the  case  of  the  munici- 
pality, in  this  region  such  land  will  under  forest  management  yield  at 
least  500  feet  B.  M.  per  annum  on  the  average.  This,  then,  means  to 
the  railroad  that  every  acre  kept  under  management  will  some  time  yield 
500  feet  of  lumber,  or  from  1,500  to  2,000  Ibs.  of  freight  for  each  year 
that  the  forest  crop  is  maintained.  If  this  lumber  should  be  shipped  to 
the  middle  west  it  means  a  gross  revenue  to  the  railroad  of  perhaps  $5.00 
or  more  per  acre  per  annum,  for  transportation  only. 

The  Small  Owner — The  writer  believes  that  the  forester  can  seldom 
advise  the  small  owner,  either  corporate  or  individual,  to  practice  forestry 
except  in  the  case  of  the  farm  woodlot  owner.  The  farmer  consumes 
most  of  the  product  of  his  own  forest,  thus  saving  all  selling  costs,  mid- 
dleman's profits,  and  transportation  to  a  distance.  What  he  does  not 
consume  goes  to  his  neighbor.  To  this  strong  economic  position  as  to 
markets  may  be  added  several  other  advantages.  Protection  and  admin- 
istration costs  nearly  disappear  because  the  farm  woodlot  is  generally  in 
sight  of  the  residence  and  fields,  and  is  surrounded  by  clearings,  hence 
patrol  is  unnecessary  and  fires  seldom  will  occur.  Because  of  the  small 
cutting  areas  necessary  in  the  farm  woodlot,  reproduction  will  in  nearly 
every  case  come  naturally,  without  extra  expense,  providing  grazing  is 
properly  restricted.  Finally,  though  the  farmer  pays  high  interest  rates 
when  he  borrows,  he  works  principally  on  his  own  capital,  on  which  he 
makes  a  very  low  rate  as  a  rule.  Hence  in  most  cases  his  forest  invest- 
ment really  comes  in  the  low  interest  rate  class. 

These  advantages  place  him  in  the  best  position  of  any  private  owner 
and  the  large  product  of  farm  woodlots  in  this  country  as  compared 
with  the  National  Forests  indicate  that  their  economic  position  is  much 
stronger  than  the  latter.  Cuttings  can  be  carried  on  annually  in  the 
farm  woodlot  in  most  cases,  thus  resulting  in  an  annual  income  from  it, 
and  also  in  the  most  complete  utilization,  because  windfalls  and  trees 
otherwise  damaged  can  be  utilized  before  they  decay.  Some  of  these 
advantages  will  not  be  realizable  until  the  pioneer  stage  is  passed,  but 
this  will  undoubtedly  pass  with  great  rapidity  in  this  state  because  of 
the  many  natural  advantages  it  possesses  for  the  settler. 

In  spite  of  the  great  possibilities  of  the  farm  woodlot,  full  produc- 

15 


tion  is  not  likely  to  be  realized  unless  some  technical  advice  is  available. 
Practically  all  governments  have  found  it  expedient  to  furnish  this  at 
government  expense.  This  is  now  being  done  in  the  Eastern  United 
States,  and  should  be  strongly  recommended  here.  It  may  seem  prema- 
ture to  take  up  such  work  at  the  present  stage  of  farm  development  in 
Washington,  but  as  a  matter  of  fact,  large  farm  areas  are  bound  to  suffer 
in  the  not  distant  future  for  want  of  timber  because  its  obvious  abundance 
led  to  the  cutting  of  every  tree  for  lumber.  The  down  timber  will  dis- 
appear within  a  short  ime  and  leave  no  timber  available  on  many  farms, 
or  at  a  convenient  distance  from  them.  Moreover,  a  farm  woodlot  may 
usually  be  established  in  a  recently  logged  off  area  at  no  expense,  while 
later,  when  all  young  growth  has  been  destroyed,  planting  would  be 
necessary. 

It  is,  of  course,  obvious  that  if  any  owner  can  make  forestry  pay 
one  per  cent  or  more  over  the  rate  at  which  he  can  borrow  money,  he  can 
on  his  own  capital  make  two  per  cent  or  more  above  the  interest  rate 
at  which  he  can  borrow.  For  example,  if  a  corporation  can  make  capital 
invested  in  forestry  yield  six  per  cent  and  can  borrow  at  five  per  cent, 
it  can  carry  on  an  operation  by  borrowing  50  per  cent  of  the  capital 
required  at  five  per  cent  and  carrying  the  other  50  per  cent  by  funds 
leceived  originally  from  sale  of  stock.  Since  all  the  capital  yields  6  per 
cent,  while  only  5  per  cent  interest  is  paid  on  half  of  it,  the  other  half 
will  receive  7  per  cent.  If  it  borrows  two-thirds  of  its  capital  at  5  per 
cent,  the  remaining  one-third  receives  8  per  cent  dividends.  In  the  same 
way  if  a  state  can  make  capital  it  uses  in  this  way  yield  6  per  cent, 
though  borrowed  on  4  per  cent  bonds,  the  portion  of  its  capital  coming 
from  its  general  fund  would  yield  10  per  cent,  i.  e.,  6  per  cent  earned 
by  the  general  fund  proposition  itself,  and  2  per  cent  additional  from  each 
of  the  thirds  coming  from  bonds.  By  using  its  general  credit  the  state 
could  borrow  all  the  funds  on  4  per  cent  bonds  and  make  2  per  cent  on 
all  capital  borrowed  without  advancing  a  cent  from  its  general  fund.  Or 
it  may  prefer  to  let  its  citizens  have  the  wood  products  at  cost  and  neither 
make  nor  lose  money. 

Taxes  as  an  Element  in  Cost  of  Producing  Timber* 

It  should  be  noted  first  of  all  that  taxes  do  not,  as  sometimes  stated, 
make  up  the  chief  cost  of  the  production  of  timber.  They  are  in  fact 

*Many  foresters  in  computing  cost  of  growing  timber,  have  treated  taxes 
under  the  general  property  tax  as  an  average  sum  paid  annually  throughout 
the  life  of  a  single  crop.  This  introduces  gross  inaccuracy  into  the  calcula- 
tion of  the  interest  charge  on  the  taxes,  making  the  taxes  and  interest 
thereon  appear  to  be  far  greater  than  is  the  case  in  practice.  This  may  ac- 
count for  the  widespread  idea  that  taxes  are  the  chief  cost  in  growing  timber. 
A  specific  example  as  to  what  the  effect  of  this  method  would  be  in  the 
present  computation  is  as  follows: 

The  total  first  cost  of  taxation  on  Quality  I  soil  in  60  years,  as  shown 
in  Table  I,  on  the  basis  of  the  tax  estimates  on  page  6,  is  $43.00.  By  the 
method  of  averaging  the  general  property  tax  over  the  entire  time  of  grow- 
ing a  crop  this  would  amount  to  an  average  of  72  cents  per  acre  per  annum. 
Referring  to  interest  tables  we  find  that  with  6  per  cent  interest  $1.00  paid 
annually  and  placed  at  interest  for  60  years  amounts  to  $533.14  by  the  end 
of  the  period.  Seventy-two  cents  paid  annually  would,  therefore,  amount  to 
.72x$533.14  equals  $383.86,  total  accumulated  sum,  both  principal  and  interest. 
Deduct  $43.00,  the  principal,  and  we  have  left  $340.86,  the  accumulated  interest. 
Compare  this  with  $77.40,  the  accumulated  interest  at  6  per  cent  when  it  is 
computed  on  the  general  property  tax  sums  more  nearly  according  to  their 
actual  incidence  and  the  difference  is  striking.  It  is  so  great  in  fact  as  to 
make  taxes  together  with  interest  thereon,  appear  as  one  of  the  most  important 
costs  in  forestry,  when  such  is  not  the  case. 

16 


rather  a  minor  charge,  though  undoubtedly  making  up  a  larger  proportion 
of  the  cost  of  production  than  in  some  other  industries.  Mr.  J.  W.  Bris- 
lawn,  of  the  State  Tax  Commission,  stated  before  the  tax  conference  at 
the  University  of  Washington,  May,  1912,  that  the  farmer  pays  ap- 
proximately 6.43  per  cent  of  his  gross  earnings  for  taxes.**  Referring 
to  Tables  II,  IV,  and  VI,  it  may  be  seen  that  the  first  cost  of  taxes  under 
the  general  property  tax  amounts  to  from  3  per  cent  to  10  per  cent  of  the 
cost  of  producing  timber,  hence  not  differing  widely  from  taxes  in  agri- 
culture. However,  so  far  as  the  owner  is  concerned,  the  actual  cost  to 
him  is  more  than  twice  as  great  because  of  the  interest  charges  which 
accumulate  on  the  tax  payments  before  the  timber  crop  can  be  harvested. 

If  the  taxes  were  deferred  until  the  crop  is  harvested  it  would  be 
of  advantage  to  the  owner  without  an  entirely  corresponding  loss  to  the 
state  which  works  under  a  lower  interest  rate.  A  yield  tax  at  the  time 
of  cutting,  greater  in  the  aggregate  than  the  present  general  property 
tax,  in  fact  large  enough  to  entirely  reimburse  the  state  for  the  deferred 
payment,  would  be  advantageous  to  the  producer  of  timber. 

Should  the  producer  of  timber  be  subjected  to  a  yield  tax  it  would 
need  to  be  placed  at  much  less  than  25  per  cent  of  the  gross  yield  or  it 
would  cost  the  owner  far  more  than  the  present  system,  interest  included. 
By  referring  to  the  6  per  cent  column  in  Table  I,  it  may  be  seen  that 
the  amount  of  the  general  property  tax  and  interest  thereon  is  $120.40. 
If  a  25  per  cent  yield  tax  were  computed,  as  in  the  3  per  cent  to  4^ 
per  cent  columns,  it  would  cost  the  owner  $163.81,  a  much  greater  amount 
than  the  present  system.  The  main  advantage  of  the  yield  tax  then,  unless 
the  percentage  were  reduced,  would  be  that  it  could  be  met  easier  when 
the  timber  was  cut.  This  would  be  no  great  advantage  except  to  owners 
who  managed  forests  under  intermittent  yield,  a  poor  system,  and  one 
not  apt  to  be  maintained  by  any  owner.  A  properly  managed  tract  will 
give  a  yield  annually  from  some  part  of  the  tract.  Hence  this  system 
is  not  considered  by  the  writer  to  be  of  much  value,  unless  the  percentage 
cf  the  yield  taken  were  reduced  much  below  that  now  paid  by  the 
federal  government.  Therefore,  the  state  cannot  hope  to  secure  anything 
like  the  tax  revenue  from  private  lands  in  forest  as  it  now  secures  from 
the  National  Forests;  or  rather  as  it  will  secure  when  cutting  is  in  full 
force  in  the  National  Forests. 

In  this  connection  it  should  be  emphasized  that,  as  a  matter  of  fact, 
it  is  a  fallacy  to  assume  that  even  the  state  can  practice  forestry  without 
paying  a  tax.  The  presence  of  the  utilized  forest  means  people.  Peo- 
ple mean  taxes  for  schools,  roads,  and  general  expenses  of  government. 
Hence  the  state  must  spend  money  for  the  ordinary  purposes  for  which 
taxes  are  expended.  If  it  does  not  take  this  money  from  its  forest 
revenue  it  must  come  from  general  revenue.  Hence  in  effect  if  the  state 
undertakes  to  own  productive  property  it  must  pay  taxes  which  the 
private  owner  would  have  paid  had  the  resource  remained  in  private 
ownership.  Since  the  state  is  an  aggregation  of  citizens  mostly  tax- 
payers in  some  form,  payment  of  these  expenses  out  of  general  funds  by 
the  state  is  the  same  as  paying  a  tax  by  the  citizens. 


**See    p.    40.      Taxation    in    Washington,    University   of   Washington    Exten- 
sion Series  No.  12. 

17 


Necessity  for  Securing  Capital  for  Forest  Production  in  the 
State  of  Washington 

Production  of  timber,  it  appears  from  the  foregoing,  is  mainly  a 
question  of  the  investment  of  capital  either  by  the  nation,  state,  individual, 
or  some  other  owner.  Those  owners  who  must  pay  or  can  get  high 
interest  rates  for  the  use  of  capital  cannot  wisely  undertake  the  produc- 
tion of  timber  as  an  investment,  even  if  they  were  content  with  such 
long  term  investments,  which  is  seldom  the  case.  High  priced  capital 
means  high  cost  of  growing  timber  even  more  strongly  than  it  means 
high  cost  of  production  in  other  lines.  Yet  since  the  State  of  Washington 
has  enormous  areas  fitted  only  for  the  growth  of  timber,  or  far  better 
for  such  growth  than  for  any  other  purpose,  it  seems  exceedingly  im- 
portant that  the  capital  be  forthcoming.  If  capital  is  not  secured,  the 
state  will  be  unable  to  utilize  this  area,  unproductive  for  other  purposes, 
and  by  so  much  fail  to  obtain  the  full  productivity  that  its  resources 
warrant.  Failure  of  this  raw  material  for  industry  means  so  much  less 
industry,  which  is  also  a  very  important  matter. 

Sources  of  Capital  for  Forest  Production 

There  are  four  sources  of  capital  which  may  in  a  greater  or  less  de- 
gree be  relied  upon  for  large  scale  forest  production,  viz.,  the  nation,  the 
state,  the  municipality,  and  the  large  corporation.  As  previously  stated, 
the  cost  of  capital  to  practically  all  others  is  so  high  that  the  well  in- 
formed forester  cannot  conscientiously  recommend  forest  production  as 
a  profitable  or  even  a  self  supporting  enterprise,  except  in  the  case  of 
the  farm  woodlot.  Of  these  four  possible  sources  of  capital  the  munic- 
ipality may  for  the  present  be  expected  at  the  most  to  deal  only  with 
city  watersheds,  although  it  would  be  an  excellent  investment  for  many 
cities  to  secure  adjacent  tracts  of  rough  lands  for  forest  parks,  which 
could  serve,  not  only  for  park  purposes,  but  also  give  revenue  to  the 
city.  The  large  corporation  cannot  be  relied  upon  to  furnish  the  capital 
now  nor  at  any  time  in  the  future  until  it  is  definitely  decided  whether 
it  will  have  equal  privileges  with  other  owners. 

It  then  devolves  chiefly  upon  the  state  and  nation  to  raise  the  neces- 
sary capital  for  this  need,  which  a  little  careful  consideration  shows  to 
be  vital  to  the  state.  The  State  of  Washington  has  done  nothing  in  this 
line  as  yet  and  it  will  no  doubt  be  difficult  for  it  to  devote  large  sums 
to  this  purpose.  Instead,  therefore,  of  there  being  any  jealousy  of  the 
work  of  the  federal  government  in  forest  production,  it  seems  that  intel- 
ligent cooperation  should  be  the  uniform  rule.  The  writer  expects  to 
see  the  day  when  there  will  be  a  vigorous  demand  from  the  people  through 
members  of  Congress  for  the  expenditure  of  government  funds  for  this 
purpose  to  the  end  that  the  resources  of  the  state  may  be  made  as 
productive  as  possible.  Certainly  such  productive  expenditure  is  far 
more  important  to  the  state  than  federal  expenditures  on  government 
buildings,  which  merely  result  in  moving  government  offices  out  of  private 
buildings,  and  by  so  much  decrease  the  demand  for  space  in  the  latter. 
The  main  advantage  of  these  latter  expenditures  is  the  purely  selfish  one, 
that  because  of  the  supposed  prodigality  of  the  government,  persons  who 
have  something  to  sell  (either  material  or  labor)  may  sell  more  of  it  at 
better  prices  for  the  construction  of  a  government  building  than  for  a 

18 


private  building  to  house  the  same  offices.  Forest  production  by  the 
federal  government  means  not  only  benefits  from  present  expenditure  of 
government  funds  in  the  state  where  they  do  not  interfere  with  private 
enterprise,  or  even  with  investment  by  the  state  (because  there  is  more 
to  be  done  than  both  can  do),  but  also  that  the  productive  results  of  these 
expenditures  will  mainly  accrue  to  the  state  in  the  future  because  its 
citizens  will  receive  wages  for  protecting,  growing,  and  harvesting  the 
timber,  and  when  mature  using  it  at  reasonable  cost  primarily  in  wood 
industries,  and  ultimately  in  all  the  other  industries  of  the  state. 

The  federal  government  at  present,  however,  has  its  hands  fully 
occupied  in  the  administration  of  the  considerable  areas  already  set  aside 
for  forest  production.  There  is  no  probability  that  those  areas  will  at 
present  be  extended  by  purchase  of  private  lands,  although  a  policy  of 
acquisition  of  alienated  lands  inside  the  present  boundaries  of  the  Na- 
tional Forests  would  be  very  useful.  Aside  from  the  National  Forests, 
irresistible  logic  leads  to  the  conclusion  that  for  the  present  nothing  will 
be  done  to  continue  cutover  lands  and  land  unfit  for  agriculture,  as  pro- 
ducing areas,  thus  contributing  to  the  industries  and  general  welfare, 
unless  it  be  done  by  the  state. 

Will  a  people,  granted  popular  rule,  make  expenditures,  the  benefits 
of  which  will  accrue  in  the  more  or  less  distant  future,  or  will  they  only 
make  expenditures  of  the  hand-to-mouth  sort?  Will  they  use  their  natural 
resources  with  regard  only  for  today,  looting  and  destroying  in  any  way 
to  make  today's  profit  the  easiest  at  whatever  expense  to  the  future,  or 
will  these  resources  be  conserved?  This  is  undoubtedly  the  severest  test 
of  democracy,  if  not  the  supreme  test,  in  the  long  run.  If  only  today's 
needs  are  considered  and  resources  destroyed  without  measures  being 
taken  for  replacing  the  renewable  ones,  it  needs  no  prophet  to  see  that  the 
power  of  a  given  area  to  support  population  must  continually  decrease. 
Place  against  this  the  fact  that  population  normally  increases  and  we 
cannot  escape  the  conclusion  that  a  continually  lower  standard  of  living 
must  follow,  together  with  a  lower  civilization  as  its  inevitable  result. 

The  United  States,  with  its  great  resources  and  small  population,  has 
not  felt  the  results  of  the  enormous  waste  of  its  resources  as  yet.  Cer- 
tain eastern  states  are  beginning  to  feel  them,  in  so  far  as  it  concerns 
their  forest  resources,  and  are  taking  steps,  halting  and  inadequate  so  far, 
to  provide  for  the  future.  It  remains  to  be  seen  whether  Washington  will 
act  in  time  or  whether  it,  too,  will  wait  until  the  damage  done  is  so  great 
as  to  render  the  cost  of  repair  many  times  greater  than  it  would  be  if 
immediate  action  were  taken.  It  seems  certain  that  a  wider  knowledge 
of  the  need  and  wonderful  possibilities  before  the  state  will  contribute  to 
the  desired  end. 

While  it  is  not  within  the  field  of  this  discussion  to  make  extended 
suggestions  as  to  state  policy,  one  point  deserves  mention.  Referring  to 
Table  V,  showing  costs  of  production  on  the  poorest  quality  soil,  it  may 
be  noted  that  with  private  owners  the  cost  of  production  runs  from  $14.01 
to  $37.50  per  M.  feet.  As  the  material  produced  on  this  poor  quality 
4oil  will  be  very  small  sized  at  60  years  of  age  and  consequently  of  low 
value,  it  is  unsafe  for  any  private  owner  to  expect  to  undertake  produc- 
tion of  timber  in  this  soil  quality  unless  in  very  exceptional  cases.  The 
state  or  federal  government  may  do  so  with  a  reasonable  expectation 

19 


of  at  least  paying  costs.  Since  this  class  of  land  is  most  certainly  not 
agricultural  in  character,  it  would  seem  that  this  would  be  a  wise  point 
of  attack  in  beginning  a  policy  of  purchase  by  the  state  for  the  purposes 
of  forest  production.  Here  at  least  is  land  which  will  produce  nothing 
unless  the  state  produces  timber  upon  it.  This  it  can  do  with  benefit  to 
its  industries  and  without  damage  to  any  private  interest.  The  extension 
of  the  purchase  policy  could  be  worked  out  as  the  needs  of  the  future 
might  suggest. 

Comparative  Cost  of  Providing  a  Future  Supply  by  Growing  New  Timber 
and  by  Hoarding  Old  Timber 

This  subject  is  introduced  here  because  of  the  close  relationship  to 
the  problem  of  growing  timber.  Most  corporations,  and  to  a  large  extent 
the  federal  government,  proceed  on  the  theory  that  the  best  way  to  insure 
a  timber  supply  in  the  future  is  by  hoarding  mature  timber.  It  is  of 
interest,  therefore,  to  apply  the  financial  test  to  the  cost  of  holding  timber 
as  compared  with  growing  it.  This  can  be  done  in  several  ways,  one  of 
which  is  by  reducing  to  present  value  the  stumpage  price  at  which,  in  the 
foregoing  tables,  it  has  been  shown  that  timber  can  be  produced.  In 
these  reductions  the  same  interest  rate  should  be  used  as  was  used  in  com- 
puting the  cost  of  growing  timber. 

Thus  by  reference  to  Table  III,  covering  cost  of  growing  timber 
on  Quality  II  soil,  we  find  that  a  corporation  working  under  5%  in- 
terest can  produce  timber  for  $9.87  per  M.  ft.  B.  M.  on  a  60  year  ro- 
tation. It  would  then  not  be  profitable  to  pay  an  amount  for  mature 
timber  (not  increasing  its  volume,  but  to  be  held  60  years)  which  would 
bring  its  cost  to  more  than  $9.87  at  the  end  of  that  time,  except  as 
the  timber  now  mature  would  be  of  higher  quality.  The  amount  that 
could  be  paid  per  M.  would  be  the  present  worth  of  $9.87,  less  the 
present  value  of  the  cost  of  protection  and  taxes  throughout  the  period. 
It  is  somewhat  difficult  to  determine  the  latter  costs,  but  a  conservative 
figure  may  be  ascertained.  Since  the  researches  of  Prof.  F.  G.  Miller 
show  that  timber  is  already  taxed  %c  per  M.  per  annum  on  the  average, 
and  the  fire  risk  and  protection  must  also  be  counted,  it  seems  that  3c 
per  annum  throughout  the  period  would  be  a  very  low  cost  for  this  item. 
The  solution  then  follows. 

Referring  to  interest  tables*  we  find  that  the  present  value  of  $1.00 
due  60  years  hence  will  at  5%  compound  interest  be  $.0535.  The 
present  value  of  $9.87  will  then  be  $9.87x$.0535=$.53.  Referring  to 
the  same  table,  we  find  that  the  present  value  of  $1.00  due  each  year  for 
60  years  is  $18.929.  The  present  value  of  $.03  due  each  year  for  60 
years  would  be  $.03xl8.929=$.57=present  value  of  the  administrative 
costs,  taxes  and  other  expenses  of  holding  the  timber.  Deducting  the 
$.57  (the  cost  of  holding)  from  $.53  (the  present  value  of  $9.87,  the 
cost  of  producing  timber)  we  have  — $.04,  that  is,  even  if  the  timber 
were  given  to  a  corporation  to  be  held  60  years  it  would  be  cheaper  to 
grow  it  than  to  take  the  old  timber. 

To  consider  the  holding  of  timber  in  private  ownership  for  60 
years  would  be  far  fetched  except  perhaps  in  the  case  of  the  largest 

*C.  S.  Schenck  "Forest  Finance,"  p.   39. 

20 


corporations,  which  could  be  placed  on  a  basis  of  permanent  invest- 
ment. It  would,  however,  easily  be  possible  in  many  cases  for  corpora- 
tions or  companies  wishing  to  insure  a  future  timber  supply  to  their  mills 
to  secure  tracts  bearing  young  growth  at  prices  which  would  give  the 
same  advantage  relative  to  the  short  length  of  time  held  that  the  above 
example  gives  for  60  years.  For  example,  Douglas  fir  stands  10  to  50 
years  old  can  often  be  purchased  at  prices  little  greater  than  the  land 
value.  If  the  land  value  in  such  cases  does  not  exceed  $10.00  per  acre 
and  the  timber  can  be  bought  for  $10.00  per  acre,  the  cost  per  M.  of  the 
stumpage  at  the  end  of  20  years  would  be  as  follows,  where  the  interest 
rate  is  6%.  Interest  on  land  value  20  years=$10.00x(1.0620— 1)= 
10.00x2.21==$22.10.  Cost  of  young  timber  is  10x$3.21=$32.10.  Cost  of 
protection  and  administration  for  20  years  equals  20(1.0620 — 1)=$7.36 

.06 

Total  cost  per  acre  of  the  stand  at  end  of  20  years  equals  $22.10+$32.10 
-J-$7.36=$61.56,  total  cost  per  acre.  If  the  acre  is  well  stocked  and  on 
Quality  I  forest  soil  it  should  yield  44,000  ft.  B.  M.  per  acre  at  the  age 
of  60  years,  thus  the  cost  per  M.  ft.  20  years  hence  would  be  $1.40.  That 
is,  it  would  have  to  sell  for  only  $1.40  per  M.  ft.  to  give  the  present  pur- 
chaser on  those  terms  6%  on  his  investment.  Mature  timber,  no  longer 
making  growth,  purchased  now  for  even  as  low  as  $1.00  per  M.  and 
held  for  20  years  on  land  worth  $10.00  per  acre  will  cost  as  follows 
where  the  stand  is  50,000  feet  per  acre  and  the  annual  expense  of  pro- 
tection is  20c  per  acre.  Cost  of  original  stumpage  payment  per  acre  equals 
$50.00x1. 0620=$50.00x3.21==$l  60.50 

Use  of  land=$10x(1.0620—  I)=$10x2.21=$22.10 

Annual   cost   of   administration   and   protection 
=20  ( 1 .0620— 1  )^$7.36 
.06 

Taxes  at  2c  per  M.  per  annum=l  .00 ( 1 .0620— 1  )  =$36.78. 

.06 

Total  cost  per  acre  at  end  of  20  years 

=$1 60.50-f$22. 1 0+$7.36+$36.78==$226.74. 

Cost  per  M=226.74=$4.57. 
50 

Of  course  this  old  timber  will  be  more  valuable  material  but  not 
sufficiently  so  to  make  this  as  good  an  investment  as  the  young  timber 
even  at  the  low  price  of  $1.00  for  the  old.  Where  $2.00  is  paid  now  the 
stumpage  price  must  be  over  $9.00  per  M.  in  20  years  to  make  the  pur- 
chase a  6  per  cent  investment.  Of  course,  every  individual  case  of  this 
sort  must  be  dealt  with  on  its  merits. 

The  comparative  cost  of  insuring  a  future  timber  supply  by  growing 
timber  or  by  storing  mature  stands  is  a  more  important  question  on  state 
and  federal  lands  than  on  private  lands,  because  it  is  a  reasonable  con- 
clusion from  the  tables  of  cost  of  growing  timber  that  upon  the  state 
and  nation  will  devolve  this  task.  The  state  is  already  pursuing  an  active 
policy  of  sale  of  mature  timber,  but  many  people  question  the  federal 
policy,  which  is  providing  for  very  few  sales.  There  are  on  the  National 
Forests  large  areas  of  mature  and  over-mature  timber  which  could  be  sold 
for  $1.00  per  M.  feet  or  more  in  any  normal  times.  These  stands  are 

21 


over-mature  and  tend  rather  to  decrease  than  increase  in  volume.  They 
average  40,000  to  50,000  feet  B.  M.  per  acre.  The  cost  of  holding  a 
stand  of  this  nature  of  40,000  feet  volume  on  Quality  I  soil  would  be  as 
follows,  figuring  3  per  cent  interest,  a  present  value  of  $1.00  per  M., 
$10.00  per  acre  for  soil  value  and  20c  per  acre  for  protection  and  ad- 
ministration. 

Soil  rent=10.00xl.036°—  I)=$10.00x4.892=$48.92. 

Future  value  of  timber  at  compound  interest  for  60  years 
=$40.00x1.  0360=40x5.892=$235.68. 

Protection  and  administration  cost  20c  per  acre  for  60  years 
=.20(1.0860— 


.03 

Total  cost  of  holding  per  M.=$317.21-^-40=$7.93  per  M. 

Comparing  this  cost  with  $3.36,  the  cost  of  producing  timber  on  the 
liberal  estimates  shown  in  Tabel  IV  it  will  be  more  than  twice  as  expensive 
for  the  federal  government  to  secure  future  timber  supply  by  holding 
mature  timber  now  worth  $1.00  or  more  per  M.  than  it  would  be  to  cut 
off  such  timber  and  reforest  so  as  to  raise  a  new  crop  during  the  60  years. 
It  is,  of  course,  freely  admitted  that  the  value  of  the  old  timber  per  M. 
feet  would  be  greater  than  that  of  the  young,  but  in  no  such  proportion 
as  indicated  above.  The  cutting  of  old  forests  and  the  growth  of  the 
young  on  the  ground  thus  vacated  will  also  result  in  the  .area  furnishing 
within  the  60  years  over  twice  as  much  volume  of  timber  for  use  of  the 
people.  Seemingly  this  should  be  the  chief  consideration. 

It  is  argued,  of  course,  that  the  government  does  not  intend  to  hold 
the  old  timber  so  long,  and  that  by  cutting  in  20  to  30  years  the  govern- 
ment can  make  great  profits  by  holding.  This  is  too  great  a  question  to  treat 
in  detail  here,  but  there  seems  to  be  no  difficulty  in  demonstrating  that 
this  is  poor  financial  policy.  However,  it  is  not  necessary  to  resort  to  finan- 
cial arguments  to  show  that  the  policy  of  holding  mature  and  over-mature 
timber  is  bad  from  the  public  standpoint,  because  in  a  great  measure  it 
defeats  one  of  the  principal  objects  of  the  National  Forests,  viz.,  to  fur- 
nish a  large  volume  of  timber  for  use  by  consumers.  This  is  defeated  be- 
cause the  soil  functions  only  for  the  storage  of  old  timber,  not  for  the 
growth  of  new.  Proper  forest  management  requires,  however,  that  the 
old  stand  be  removed  gradually  and  replaced  by  new.  Where  the  federal 
government  does  cut  timber,  effort  is  made  to  see  that  the  ground  is  re- 
forested. 

With  the  state,  the  argument  for  immediate  cutting  of  mature  timber 
within  reasonable  limits  is  still  stronger,  because  the  interest  rate  is  some- 
what higher.  The  cost  of  holding  mature  timber,  involving  a  large  initial 
investment  as  compared  with  growing  new  timber  is,  therefore,  still  higher. 
The  state's  policy  fails  when  it  comes  to  growing  the  new  timber,  however. 
Nothing  is  as  yet  being  done  in  this  direction,  so  that  land  when  cut  over 
is  not  even  functioning  for  storage  of  timber.  The  two  policies  may 
thus  be  contrasted,  the  state's  being  inadequate  in  the  direction  of  growing 
timber  after  cutting,  and  the  federal  government  in  the  direction  of  a 
reasonable  amount  of  cutting  so  as  to  permit  growth  of  new  timber. 


22 


Summary  of  Principal  Conclusions 

1.  The  chief  cost  of  producing  timber  is  the  interest  on  the  capital  in- 
volved. 

2.  It  follows   from    (1)   that  the  interest  rate  under  which  the  forest 
owner  works,  to  a  large  extent  determines  the  cost  of  producing 

her  to  the  owner  concerned. 

3.  Taxes,  though  important,  are  a  minor  cost  as  compared  with  interest 
charges. 

4.  The   costs   of   production  under  high  interest  rates  are  so  great  as 
to  bar  forest  Droduction  to  those  owners  who  cannot  secure  money  at 
a  rate  not  much,  if  any,  higher  than  5  per  cent. 

5.  This  makes  forest  production  at  a  profit  possible  only  to  the  federal 
government,  the  state,  the  municipality  and  the  large  corporation,  and 
those  owners  exceptionally  situated  as  to  the  ownership  of  land  for 
other  purposes,  such  as  mining,  in  connection  with  farming,  etc. 

6.  Since  the  federal  government  is  already  practicing  forestry  so  far  as 
its  resources  make  practical  at  present,  the  large  corporation  is  not 
likely  to  become  interested  under  present  conditions,  and  the  munici- 
pality can  engage  only  to  a  limited  extent;  there  is  little  hope  of 
introducing  forest  practice  in  adequate  manner  except  through  the 
state. 


23 


Caylord  Bros. 

Makers 

Svracuse,  N.  Y 
PAT.  JAN.  21,1908 


C.  BERKELEY  LIBRARIES 


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